November 2012
IN THIS ISSUE
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Individual Income Tax Rates –
Withholding Obligations
$37,001 - $80,000
$3,572 plus 32.5c for each $1
between $37,001 and $80,000
$80,001 - $180,000
$17,547 plus 37c for each $1
between $80,001 and $180,000
Living Away From Home Allowance
$180,001 and over
$54,547 plus 45c for each $1
over $180,000
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Company Loss Carry-Back Measure

Refunding Excess GST

Tax and GST Compliance for SMEs

Small business benchmarks
Employers should take care to ensure that they are
withholding the right amount of tax for each of their
employees. If you are unsure, see your registered
tax agent who can assist you to meet your
withholding obligations in respect of your employees.

Planning to sell your business?
Living Away From Home Allowance

Proof of ID for non-resident businesses

Goods taken from stock for private use

Common mistakes with reporting trust
income
The new Living Away From Home (LAFH) allowance
provisions began to apply from 1 October 2012. The
new LAFH provisions ensure that recipients of the
LAFH allowances that meet the requirements will be
tax-free and not included in the recipient’s
assessable income.

New PAYG Instalment Options

GST – claiming input tax credits
(creditable purpose)

ATO’s guide for Employers

New super data and e-commerce
standard
Individual Income Tax Rates – Withholding
Obligations
As detailed in the table below, the tax rates that
apply to resident individuals have changed:
Taxable Income
Amount of Tax Payable
$0 - $18,200
Nil
$18,201 - $37,000
19c for each $1 between
$18,201 and $37,000
In the previous issue of TaxWise, we noted that the
taxation of LAFH allowances would remain in the
FBT space. However, due to the tightening of the
availability of the concession, significant changes
have been made to the provisions in the FBT law.
The ATO has published detailed information relevant
for employers with employees subject to a LAFH
arrangement on their website (see link
http://www.ato.gov.au/businesses/content.aspx?doc
=/content/00333689.htm). There are also transitional
rules which apply to arrangements that were in place
at 7.30pm on 8 May 2012. The new rules will apply
to these existing arrangements on the earlier of the
existing arrangement changing (after 8 May 2012) or
1 July 2014 when the transitional period ends.
The ATO has also issued a draft Taxation
Determination TD 2012/D8 entitled “Fringe benefits
tax: reasonable amounts under section 31G of the
Fringe Benefits Tax Assessment Act 1986 for food
and drink expenses incurred by employees receiving
a living-away-from-home allowance fringe benefit,
for the period from 1 April 2013 to 31 March 2014”
which sets out the reasonable amounts of these
expenses for which no substantiation (ie written
documentation) by the employee will be required.
These amounts also help employers to work out the
exempt components of the benefits provided.
For employers wanting more information about the
new reasonable amounts that will apply so they can
assist their employees who are under LAFH
arrangements, a copy of the draft Taxation
Determination can be accessed here
(http://law.ato.gov.au/atolaw/view.htm?docid=DXT/T
D2012D8/NAT/ATO/00001).
To do!
If you have employees who are subject to a
LAFH arrangement, speak to your tax agent
to find out how the new rules might affect
your current arrangements with your
employees and how this may impact your
reporting obligations in relation to these
employees.
all net amounts of GST worked out in GST periods
commencing on or after 17 August 2012.
The Exposure Draft legislation makes it somewhat
more difficult for a taxpayer (usually a supplier who
supplies goods and services and is ordinarily liable
for GST on those supplies) to obtain a refund of
GST that has been overpaid unless it can show, for
example, any GST it collected from a customer has
duly been returned to that customer.
This particular provision has caused much
consternation for taxpayers with GST obligations
and, depending on the final version of the legislation
that is passed through Parliament, may continue to
do so. A Bill is also expected to be introduced into
the Spring Parliamentary sittings.
Note!
Businesses with GST obligations may wish
to speak with their tax agents about the
possible implications for them of this new
measure.
Company Loss Carry-Back Measure
Tax and GST Compliance for SMEs
We have noted in previous issues of TaxWise the
introduction of the loss carry-back measure that is to
start in the 2012-13 income year. The measure will
apply to companies (and entities taxed like
companies) who will be able to carry back up to $1
million of tax losses incurred in the 2012-13 year to
offset against tax paid in the 2011-12 income year.
From the 2013-14 income year, tax losses will be
able to be carried back and offset against tax paid
up to two years earlier.
Income Tax
Since the last edition of TaxWise, the Federal
Government issued Exposure Draft legislation on
the measure and it is anticipated that a Bill
containing the measures will be introduced in the
Spring Parliamentary sittings (ie by 29 November
2012). If the current income year is not looking so
great and you think you may incur a loss this income
year (though it may still be a little early to predict
this), you should see your registered tax agent to
discuss how these rules might apply to you. This will
help you to start to plan for your 2013 income tax
obligations.
Refunding Excess GST
The Government also recently released Exposure
Draft legislation to clarify the operation of a provision
in the tax legislation that inhibits a taxpayer from
getting a refund of GST already paid to the
Commissioner if it turns out GST was overpaid
because a supply was treated as a taxable supply
and it is later determined that the supply was
incorrectly treated that way. The measure applies to
In the previous edition of TaxWise, we outlined the
ATO Compliance Program that applies to small and
medium enterprises (SMEs) for the 2012-13 income
year. In addition to this, the ATO has issued a
specific information publication in relation to the
broader compliance obligations of SMEs. The
publication is called “Tax compliance for small-to medium enterprises and wealthy individuals”. You
can access a copy of the publication here
(http://www.ato.gov.au/businesses/content.aspx?doc
=/content/00129961.htm).
GST
The ATO has also issued a guide specifically
catering for the GST compliance obligations of
SMEs. The guide is entitled the “GST governance
and risk management guide for small-to-medium
enterprises”. The guide contains two checklists, a
simple version (for businesses with a turnover
between $2 million and $10 million) and a more
comprehensive version (for businesses with a
turnover above $10 million). The purpose of the
checklists is to assist SMEs to understand and meet
their GST obligations and identify any areas that
might need improvement (such as systems used to
record GST obligations). You can access a copy of
the guide here
(http://www.ato.gov.au/businesses/content.aspx?doc
=/content/00297537.htm).
Cutting the company tax rate
If you run a company, you may be interested to
know that the Treasurer has set up the Business
Tax Working Group (BTWG) which has been given
the task of finding ways the business tax system can
be amended to assist businesses to respond to the
current tough economic environment. One change
they are considering is a possible cut to the
company tax rate, though this is likely to involve the
removal of some business tax concessions if it is to
go ahead. The BTWG is currently examining their
options. The BTWG expects to issue their final
report on this matter in December 2012.
Small Business benchmarks
In the previous edition of TaxWise, the small
business benchmarks were mentioned as a tool that
would be used by the ATO during their Compliance
Program which applies for the 2012-13 income year.
Since the last issue of TaxWise, the InspectorGeneral of Taxation released his report on the
“Review into the ATO’s use of benchmarking to
target the cash economy” in early October. The
Inspector-General made 11 recommendations to the
ATO for the purpose of improving the way the ATO
utilises benchmarks to determine whether certain
businesses in particular industries have declared all
their income that they are likely to have derived. The
ATO has agreed to 9 of the recommendations in full
and two in part.
Businesses in industries such as hairdressers,
beauticians, newsagents, coffee shops, restaurants
and take away food shops, and clothing retailers
with typically high cash sales are just some
examples of industries where the benchmarks are
likely to be applied. These types of businesses
should see some changes in the way the ATO
applies the small business benchmarks to them as a
result of the recommendations the InspectorGeneral made to the ATO and to which the ATO
have mainly agreed.
Planning to sell your business?
If you are planning to sell, or have been thinking
about selling, your business, the ATO has put
together a factsheet for business owners. The
factsheet alerts business owners to various issues
that should be considered prior to selling a business,
such as:

Considering restructuring your business for
the purposes of sale;

How to deal with the purchaser;

Potential tax considerations.
A link to the factsheet can be found here
(http://www.ato.gov.au/content/downloads/SME0032
9712.pdf).
Proof of ID for Non-Resident Businesses
If you have a non-resident business and need to
apply for a tax file number and/or Australian
Business Number for the business, the ATO
requires new “proof of identity” standards to be met.
These are outlined in a new document they have
published called entitled "Proof of identity - for
individuals and businesses resident outside
Australia". A link to this publication is here
(http://www.ato.gov.au/businesses/content.aspx?doc
=/content/00124974.htm).
You should speak to an Australian registered tax
agent for assistance with these registrations.
Goods taken from stock for private use
In September 2012, the Commissioner issued a
Taxation Determination TD 2012/20 which sets out
the value of estimates of goods taken out of trading
stock for private use from certain types of
businesses. The Taxation Determination is entitled
“TD 2012/20: Income tax: value of goods taken from
stock for private use for the 2011-12 income year.”
The specific industries TD 2012/20 applies to are:
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Bakery;
Butcher;
Restaurant/café (licensed or unlicensed);
Caterer;
Delicatessen;
Fruiterer/greengrocer;
Takeaway food shop; and
Mixed business (eg milk bar, general store,
convenience store).
If your business is one of these, it might be worth
your while having a look at TD 2012/20 and
familiarising yourself with the amounts specified in
there relevant to your type of business.
A link to the Taxation Determination can be found
here
(http://law.ato.gov.au/atolaw/view.htm?docid=TXD/T
D201220/NAT/ATO/00001).
Common mistakes with reporting trust
income
The ATO has issued a factsheet to assist trustees to
manage the tax affairs for the trust (or trusts) for
which they are responsible. The factsheet provides
guidance to preparing the tax return for the trust as
well as some key points to preparing the statement
of distribution. The factsheet is called “Reporting
trust income and distributions - common mistakes to
avoid and changes in 2012” and can be found on the
ATO website here
(http://www.ato.gov.au/content/00332207.htm).
Tip!
If you are a trustee, it is always advisable to
speak to a registered tax agent about the tax
obligations of a trust to ensure you are
aware of those obligations, are able to meet
them or can get the assistance you might
need to meet those obligations.
New PAYG Instalment Options
If your business pays PAYG Instalments, there may
be an opportunity for you to change this so your
business can account for PAYG Instalment
obligations on an annual basis rather than the report
and pay on a quarterly basis. Your tax agent may
already have received a letter advising which of their
clients may be entitled to make this change (which
could include your business). Though the cut-off
date was 29 October 2012, this may be something
to keep in mind for next year. Your tax agent can
give you all the details you need to know about
having annual rather than quarterly PAYG
instalment obligations.
GST – claiming input tax credits
(creditable purpose)
Recently, the ATO updated the ruling it has issued
on adjustments a taxpayer, who is able to claim
input tax credits for GST paid on inputs for taxable
supplies it makes, is required to make where there
are changes to the creditable purpose for which
certain acquisitions are made.
If there are changes to the creditable purpose for
which you make certain acquisitions, this will affect
the amount of input tax credits you can claim for the
GST paid on the acquisition. For example, if you buy
a computer to use in your business, the amount of
input tax credit you can claim will be impacted by the
extent to which you actually use the computer for
your business. If you had planned to use it 100% in
your business, but end up using it for private
purposes 25% of the time and only 75% of the time
in your business, this affects the amount of input tax
credit you can actually claim.
Your registered tax or BAS agent will be able to
assist you in working out the amount of input tax
credits you are able to claim.
Note!
If you are unsure about the amount of input
tax credits you are allowed to claim for
certain assets you have bought for your
business where you have, for example,
ended up using the asset partly for private
purposes, seek advice from a professional
who can advise you on how you have
actually used the asset might affect your
ability to claim input tax credits.
ATO’s Guide for Employers
In October 2012, the ATO published a guide for
employers which covers all types of tax issues that
an employer may come across, including preparing
to hire employees, registrations the business will
need when it hires employees, reports an employer
needs to complete for tax payments withheld from
amounts paid to employees (including Payment
Summaries for employees) and what happens when
an employee stops working for you such as final
withholding payments an employer may have to
make.
Even if you have been in business for a long time
and have experience dealing with employees, it may
be useful to have a look through the guide and a
refresher regarding your obligations. You can locate
a copy of the guide through this link
(http://www.ato.gov.au/businesses/content.aspx?me
nuid=0&doc=/content/00292769.htm&page=1&H1).
New super data and e-commerce standard
The ATO held in September 2012 information
sessions to help super funds and employers get
ready to adopt the new data and e-commerce
standard, which is being introduced as part of the
Government's super reform agenda. Copies of the
information presented at these sessions can be
found on the ATO website through this link
(http://www.ato.gov.au/content/00333810.htm).
Business owners who employ staff and have
superannuation guarantee obligations to meet for
their staff should have a look at the information
provided about the new standard to ensure they
understand the new standard and when it will start to
apply. If you are an employer and are unsure of the
new requirements, see your tax agent who will be
able to assist you.
DISCLAIMER
Taxwise® News is distributed quarterly by
professional tax practitioners to provide
information of general interest to their clients.
The content of this newsletter does not constitute
specific advice. Readers are encouraged to
consult their tax adviser for advice on specific
matters.